1. Mr. Jackson has been awarded a bonus for his outstanding work. Its employer offers him a...
Question:
1. Mr. Jackson has been awarded a bonus for his outstanding work. Its employer offers him a choice of a lump-sum of $5,000 today, or an annuity of $1250 a year for the next Live years. Which option should Mr. Jackson choose ii pus opportunity cost is 9 percent'
2. Kingston Corp. is considering a new machine that requires an initial investment of $480.000 installed, and has a useful life of 8 years. The expected annual after-tax cash flows for the machine are $89,000 for each of the 8 stars and nothing thereafter. a Calculate the net present value of the machine if the required rate of return is II percent. h. Should Kingston accept the project (assume that a is independent and not subject to any capital rationing constraint)? Explain your answer.
3. Consider two mutually exclusive projects X and Y with identical initial outlays of $600,000 and useful lives of 5 years. Project X is expected to produce an after-tax cash flow of $180,000 each year. Project Y is expected to generate a single after-tax net cash flow of $1,015,000 in year 5. The discount rate is 14 percent.
a. Calculate the net present value for each project.
b. What decision should you make regarding these projects?
Accounting for Governmental and Nonprofit Entities
ISBN: 978-0078025822
17th edition
Authors: Jacqueline Reck, Suzanne Lowensohn, Earl Wilson